Question - The investment portfolio of Mapeni Limited consists of shares in five companies operating in different industries.
|
Company
|
Amount Invested (Sh. million)
|
Stock beta Coefficient
|
|
A Ltd.
B Ltd.
C Ltd.
D Ltd.
E Ltd.
|
160
120
80
80
60
|
0.5
2.0
4.0
1.0
3.0
|
The risk free rate (Rf) is 8%. The market returns have the following probability distribution for the next period.
|
Market return %
|
Probability
|
|
10
12
13
16
17
|
0.1
0.2
0.4
0.2
0.1
|
Required:
Compute the expected return from the market (Rm).
Calculate the beta coefficient for the portfolio (βp).
Determine the equation for the security market line.